business‎ > ‎

Candy Crush Maker Is No Zynga-IPOX's Schuster

posted 13 Mar 2014, 08:32 by Mpelembe   [ updated 13 Mar 2014, 08:32 ]
Reuters Market Access - ANCHOR:

There are a lot of skeptics out there who think Candy Crush is a one-hit wonder. The game though brings in about three quarters of King's revenue. Can King Digital really maintain the growth rate they've had in your opinion?


Well, I believe it's an interesting company. It has been actually founded like more than 10 years ago. It's only made money and revenues in the last two years. So it's a very interesting growth path for this type of firm which is potentially highly volatile but I also see IPO is priced attractively at just 12x-13x earnings and up to 5x last year's revenues. So it actually fits into a profile of growth investment.


So you think King is actually just slightly underpriced then?


Yes, we believe the investment bankers obviously want to leave a good taste in investors' mouths by under-pricing the deal slightly like incumbent Zynga is trading at 5.14x last year's revenues, and actually King Digital comes in a little lower. But again, as I said, I see the IPO price at $24. We'll see how it opens - if it opens- if it doubles or if it goes up 50%, so valuations will be much more expensive.


Now, did you see any red flags in the IPO filing?


Well, I mean not really red flags. I think the interesting bid is actually that they are a company which has this huge user base and they're actually able to monetize- start to monetize, being able to monetize on this huge user base, so that's quite interesting. I wouldn't describe it as a kind of a red flag but something very notable. Something notable was, if I'm correct, that Goldman Sachs and Morgan Stanley are absent from the lead underwriter syndicate which is kind of unusual for this type of significant deal.